What are Auditor Otto’s options — and what is she doing about them?

MinnPost file photo by Terry Gydesen
Auditor Rebecca Otto: "I was not happy with the way the law was passed and what was passed, and I made my concerns known and they did it anyway."

Rebecca Otto is trying out all her options.

The three-term DFL auditor for the state of Minnesota has been scrambling since the final night of the legislative session in May, when she heard lawmakers put a provision in the state government finance bill to allow county governments — the main entities her office audits — to seek reviews from private companies instead. Otto pushed back, but the change survived both regular session and a subsequent special session and is now in Minnesota’s law books.

Technically the new law doesn’t kick in until Aug. 1 next year, but Republicans in control of the House say they have little interest in revisiting the issue in the next legislative session, outside of reviewing a forthcoming report on her office from the legislative auditor. Another option pursued by Otto — asking 59 counties to sign a three-year contract with her office — has earned the ire of Republicans, who have requested she attend a hearing of the House State Government Finance Committee on Tuesday to answer questions about the move (Otto says she will not attend).

But she’s not out of moves yet. Some legal experts say Otto could take her case to the courts if other options fail. For now, Otto simply says she is “exploring” all her options.

“I was not happy with the way the law was passed and what was passed, and I made my concerns known and they did it anyway. I still have concerns about the way the law is drafted; it creates inefficiencies for any auditor trying to audit counties,” Otto said. “ There are many options and they all have different timelines.”

If Otto does head to the courtroom, here’s a look at her case, what her opponents might say and why she likely hasn’t acted yet.

So, what’s the legal case? Hamline University law professor David Schultz says the law change last session may violate the separation of powers between legislative and executive branches etched into the state’s Constitution, and there’s precedent for that argument in Minnesota history. In 1985, lawmakers held a special session and attempted to transfer several positions in the state treasurer’s office — back then an executive job — to the Department of Finance, which was led by an appointed official. The treasurer at the time, Robert Mattson Jr., had essentially abandoned the state and his duties during a six-month period, and lawmakers argued the office wasn’t needed. But in 1986, the state Supreme Court struck down the change, saying the Legislature didn’t have the authority to transfer one of the office’s core functions to an appointed official.

Schultz points to another case where the Minnesota Supreme Court ruled that the Legislature and governor had to fund the courts in the midst of a government shutdown. If they didn’t, the court ruled, it would prevent the judicial branch from performing its constitutional duties.

“Her strongest argument is that legislative acts can’t either change the constitutional powers of her office or it can’t act in such a way to make it impossible for a constitutional office to perform her duties,” Schultz said. “So it will come down to if she can make the case that this change will demolish the ability of her office to function.”

What’s the counterargument? One obstacle in challenging the law change, Schultz said, is that the Legislature granted the auditor the authority to do county financial reviews in the first place. Only certain roles of the auditor, such as serving on specific state boards, is defined within the Constitution. In the case of treasurer, the court protected the office even though its specific duties were prescribed by the Legislature. But more than a decade later the office was abolished anyway and moved into the main budgeting department.

State Rep. Sarah Anderson
State Rep. Sarah Anderson

GOP Rep. Sarah Anderson, chair of the State Government Finance Committee who led on changing the auditor’s office, said Otto’s legal argument is also weakened by the fact that certain counties are already exempted from getting financial reviews from the state auditor. That includes the state’s most populous county, Hennepin.

“When you look at the fact that Hennepin County is the largest financially and they don’t have to be audited by the state auditor, that makes it even harder for her to argue that others have to do this,” Anderson said.

Attorney and former Republican legislator Fritz Knaak says there’s no provision in law that the state must “guarantee a certain level of business to the auditor.”

Who would be her lawyer? Even though Otto is an elected statewide official, she would be challenging state law if she took the issue to court. In that case, Minnesota Attorney General Lori Swanson, also a Democrat, would likely have to defend the state. That’s what happened in the case of the treasurer back in 1986.

“The attorney general defends state statutes and acts essentially as the state’s defense counsel,” attorney general spokesman Ben Wogsland said. That means Otto’s office would have to hire its own counsel, which could be paid for at the public’s expense or through funds Otto could raise herself.

So, why hasn’t she taken it to court yet? Well, there’s still another legislative session on the calendar before the change kicks in next summer, and there’s a good chance a court wouldn’t find the case “ripe” until after lawmakers have another chance to change it, Schultz said. If there’s no action, Otto could file a lawsuit against the Legislature in Ramsey County Court next may May and ask for a temporary injunction until the court makes a ruling, he said.

Otto also said she’d like to give lawmakers a chance to change the provision next session.

“There is another session, another day, and I can’t predict anything,” Otto said. “This isn’t my office, this is the people’s office, and there has to be trust that money is going to be used according to the law and there is not cronyism or corruption. That is what we do; we are the watchdog. You have to have that function.”

Comments (14)

  1. Submitted by Ray Schoch on 08/17/2015 - 11:15 am.

    One unanswered question

    While I don’t discount at all the argument (and the Hennepin County example) provided by Representative Anderson, I remain more than a little curious about the motivation for this statute. Why was this change in law thought necessary? That it was part of a last-minute blob of legislation at the end of the legislative session suggests to me more political opportunism than any sort of carefully thought-out rationale for making the change. Aside from lining the pockets of a handful of private accounting firms, I confess I see no benefit to the public from this legislative action.

    • Submitted by Henk Tobias on 08/17/2015 - 12:22 pm.

      There is no benefit to the public

      in fact it could very well be detrimental. If Billy Jo Bob county commissioner has his cousin Billy Rae Bob do the audit he might just find that everything is hunky dory when in fact the country is making payments to Billy Jo Bob’s mistress.

      Also too, the private firms don’t check to see that countries are following state regulations, they just look to see if all the numbers add up, they don’t check to see if money is being spent in accordance with the provisions under which it was given. So the county could end up with all the numbers adding up but having spent grant money on something it was not intended for and then having to pay that grant money back to the state. Its not a good idea, but it fits with the Republican mantra about privatization. To them Privatization is gospel, they never ask if it works, they just do it on faith.

    • Submitted by Pat Berg on 08/17/2015 - 12:27 pm.

      It’s political payback

      She voted against granting nonferrous mining leases in Northeastern Minnesota in 2013:

      http://finance-commerce.com/2013/12/ottos-mining-move-riles-rangers/

    • Submitted by Brenden Schaaf on 08/17/2015 - 12:30 pm.

      Lower cost, same standards

      The benefit to the public is that the audits can be done at a lower cost by CPAs following the same standards that Otto’s staff follows. Often the CPAs would be more local to the county being audited and would, some could argue, be more vested in the process and the outcome given that they are a community member. I don’t think anyone has argued that the state auditor’s office does shabby work, but this legislation simply provides counties options they didn’t have before.

      • Submitted by RB Holbrook on 08/17/2015 - 02:15 pm.

        More Local

        There is another possibility, and that is that local auditors will get away with slipshod/less than honest work because of their political ties to the county. The auditors’ interests in clean local government and sound financial management might be overcome by an interest in preserving business tiews (remember that it isn’t just about the county–county officials in rural areas often have their own business interests, and those interests will need CPAs, too).

        That’s why the State Auditor was given the job instead of relying on the locals to police themselves. Quis custodiet ipsos custodes?

        • Submitted by Dan Berg on 08/17/2015 - 06:43 pm.

          That assumes

          You assume that a state politician can’t be influenced? The reasons might be different but there is no reason to think the state officials are more honest than county ones. Both situations have their potential issues but it doesn’t seem like one would be necessarily wore than the other.

          • Submitted by RB Holbrook on 08/18/2015 - 09:49 am.

            Distance

            The reason for independent auditors is to put distance between them and the auditee. The closer a relationship, the less confidence one can have in that independence.

            This is the reason that police misconduct cases are prosecuted by county attorneys from another county. There is nothing that guarantees an Anoka County prosecutor would be “more honest” in her prosecution of a Minneapolis officer than a Hennepin County prosecutor would be, but even that added level of distance lets us have more confidence in the outcome.

            • Submitted by Dan Berg on 08/18/2015 - 12:51 pm.

              Distance is not just geographic

              Distance isn’t simply based on miles or address. Elected officials can never be independent because they need to be loyal to a party in order to secure their position. That is even more true if that person has aspirations for higher office than that they currently hold.

              Your suggestion at the potential for auditors to be less than 100% impartial to me doesn’t outweigh the actual agenda which must be followed by any state wide auditor who is beholden to any political party. I say that and have a huge amount of respect for somebody like Jim Nobles who I think has done an honest and admirable job as Legislative Auditor. His impartiality is simply not reliably possible from any elected official.

              • Submitted by RB Holbrook on 08/18/2015 - 01:43 pm.

                Beholden to a party?

                Or beholden to your cronies? Take your pick. Frankly, I think I would prefer political ambitions over an urge to look out for their own select group.

                I spent a number of years living in a small, rural community. I know how close the relationships can be. I also know how that can affect judgment.

    • Submitted by RB Holbrook on 08/17/2015 - 12:48 pm.

      Easy Question

      The law was passed to limit the functions of a state Auditor who has proven to be a successful and popular elected official Taking away some of the functions of her office makes her a less visible figure, and thus less likely to make a successful bid for another office (e.g. Governor in 2018).

      It’s the same thing as was done to Robert Mattson, although the motive there may have been more punitive than calculating. Mattson was popular outstate, because of his famous name. Making the Treasurer’s office into a shadow took away such pulpit as he may have had for a future political career (not that he had many functions–weren’t they mostly limited to signing checks?).

  2. Submitted by Ron Gotzman on 08/17/2015 - 07:48 pm.

    Otto’s options?

    She will have even more time to campaign for higher office at the DFL State Fair booth.

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